MOFE, legal supervisor made mandatory for mutual savings and finance firms

Beginning next year, mutual savings and finance companies will have to appoint a legal supervisor and introduce outside directors and an audit & inspection committee.

The Ministry of Finance and Economy (MOFE) will submit a mutual savings and finance company bill with these changes in the next regular session of the National Assembly. The bill is set to come into effect next April.

Originally, MOFE planned to make the legal supervisor mandatory only for large mutual savings and finance companies, but since the Dongbang incident this was expanded to all such firms.

A MOFE official revealed that the strengthening of regulations would make life even more difficult for smaller companies as costs will increase. Therefore, the cost and effectiveness of the plan need to be carefully studied before a final policy is decided on, he added.

Currently, all banks and merchant banks have to appoint outside directors and audit committees while securities firms and insurance companies with asset volumes of over 2 trillion won and investment trusts with assets over 6 trillion won also have to adhere to this regulation.

In addition, MOFE will bolster the acquisition criteria for savings and finance companies in order to prevent imprudent M&As in the industry. The acquisition of a savings and finance company with borrowed funds from other financial institutions is to be made illegal.

Choi Young-Hae moneychoi@donga.com